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Recent Portfolio Actions

Sorry, it’s been a while since I listed my equity portfolio moves.  I made the following trades yesterday:

New Buys:

  • Chubb
  • Computer Sciences Corp
  • Dominion Resources
  • Northrup Grumman
  • National Presto (beware, less liquid)
  • SCANA Corp
  • Safeway Corp
  • Total SA

New Sells:

  • iShares Brazil Fund
  • General Dynamics
  • Honda Motors
  • Mosaic Inc
  • Nucor
  • Vishay Intertechnology

And over the past few months, I made the following trades:

Rebalancing Buys:

  • Conoco Phillips
  • Mosaic Co
  • PartnerRe
  • Pepsico Inc
  • Safety Ins Group Inc
  • Shoe Carnival Inc
  • Valero Energy Corp
  • Vishay Intertech Inc

Rebalancing Sells:

  • Assurant Inc
  • Companhia De Saneamento Basico Do Estado De Sao Paulo
  • Conoco Phillips
  • Dorel Inds Inc
  • Ensco International Inc
  • Industrias Bachoco SA ADR
  • iShares Inc MSCI Brazil Index Fund
  • Magna Intl Inc
  • Mosaic Co
  • Nam Tai Electronics Inc
  • National Western Life Insurance
  • PartnerRe
  • Pepsico Inc
  • Reinsurance Group Amer Inc
  • Shoe Carnival Inc (2)
  • Valero Energy Corp
  • Vishay Intertech Inc (2)


1)  I try not to trade too much.  For those that are new to my writings, rebalancing buys and sells are meant to bring the positions back to target weight after they have moved 20% away from the target weight.

2)  I consumed some cash today, enough to get me inside my 20% cash limit.  I don’t believe in the rally, but I maintain my discipline that I don’t let cash get too large.

3) I tried to take some cyclicality off of the table today.  I end up with a little more insurance, utility, and energy exposure, but less of industrials and basic materials.

4) Assurant and SABESP are still double weights.  The rest of the portfolio is equal-weighted aside from that.

5) In terms of balance sheets, and industry factors, this is my most conservative portfolio ever.

6) I still don’t trust the financial sector aside from insurers here.

7) I had some runners-up in my analyses: ACE AEE EE HELE TFX UGI

8 ) I think my portfolio is cheaper and more defensive now.

9) That said, I also raised my central band by 11% today, raising all of my target weights by that amount.  That makes me more likely to be a buyer than a seller, though the change caused no buys yesterday.

10) Dropping the iShares Brazil Fund seemed to be wise.  The run in the emerging markets has been huge, and Brazil is more export and commodity dependent than most.


Industry Rotation, Stocks, Value Investing | RSS 2.0 |

3 Responses to Recent Portfolio Actions

  1. Kieran says:

    It sounds as if you’re more bearish now than in 2003. Why? It is doubtful that the Fed will remove liquidity any time soon. While there may be headwinds in terms of value, the consumer, and real estate, the appetite for junk bonds keeps growing. As long as that’s the case, the likely-to-become-insolvent crowd will be able to meet short-term payments, and asset bubbles could continue to grow.

  2. Couldn’t you be adequately diversified with half as many names? Or do you feel you need this many?

  3. Brian Powers says:

    David, I am curious about your rebalancing threshold. Do you calculate this 20% threshold using a formula like this:

    = Target Size / Current Size – 1

    I have a small portfolio of twenty securities. A full position size in the portfolio is 8% (position size would be 1 for an 8% holding). The position size targets are based generally on .25 increments (so a position target of .25 is 2% of the portfolio and there are 12.5 slots “available”). I used that formula above for a while, but I found that it was biased towards smaller positions.

    Instead I began using this formula:

    = (Target – Current Size) / .25

    So a .50 sized holding and a full sized holding may have both been 2% below the target (using the first formula), but using the second formula, they would be 8% and 16% below the target respectively. I found this showed me the true deviation from the portfolio target size and put my holdings on an equal footing for rebalancing.

    I was curious how you calculated your threshold, or if it was less of an issue because you tended to have full sized positions. For me, I tend to start small and build positions over time. There are certain positions I hold that I know will stay in the .25-.50 range because they either carry more risk, they are funds/ETFs, or they are paired with a similar holding that together give me the weight I want in a particular sector.

    Thank you for your time and your writings. I have truly enjoyed and learned from your work for many years.


David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures.

Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. This blog exists to educate investors, and give something back. It is not intended as advertisement for Aleph Investments; David is not soliciting business through it. When David, or a client of David's has an interest in a security mentioned, full disclosure will be given, as has been past practice for all that David does on the web. Disclosure is the breakfast of champions.

Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of.

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